Though a spokesman for Stumptown Coffee says that Duane Sorenson is still in control of the Portland coffee chain, doubts are beginning to form. I may have to retract my original post on the subject. Here are some of the rumors that have me wondering what is really going on, and a bit of commentary.
1. These are the numbers I am hearing: TSG owns 90% of Stumptown, leaving Duane a minority owner.
When TSG invests in a company, they seem to pay between $30-40 million dollars. This would mean Duane has some nice pocket change. Unfortunately TSG is in the money making business, so everyone will be squeezed – growers, buyers and even employees. It is all going to trickle down.
2. TSG is a very large investment firm that buys and sells companies for the sole reason of making money. From Willamette Week’s investigation -
Alexander Stavros Panos oversees the New York City office of private equity fund TSG Consumer Partners, which, according to the company’s $15 million stake in Island Oasis Frozen Cocktail Co., a Walpole, Mass. company that makes machines and mixes for frozen margaritas., “is the recognized leader in the U.S. in building and investing in leading middle-market branded consumer companies.” TSG has a track record of investing in specialty drinks: Previous investments have included Glaceau Vitamin Water and Voss Water, and the fund currently holds a
Why would they bother with a small stake in Stumptown Coffee? This does not sound like a company that does this sort of investing.
3. Why is Stumptown being so obtuse? In typical corporate speak, they dance all around whether Duane is majority owner, just saying that “Duane is still very much in charge of Stumptown.” Here is another pearl from the Willamette Week article -
‘When asked who currently owns a majority share of Stumptown, Lounsbury said: “I can’t really answer that one way or another. I can just tell you Duane is very much in charge of Stumptown.”‘
In filings in Oregon, he is named the president and secretary of Stumptown Coffee Corp., and as the authorized representative of its two subsidiaries, Stumptown Coffee and Stumptown Coffee Roasters Inc. Mr. Panos also said that he had no involvement with an entity registered in Delaware as Stumptown Coffee Corp. on April 11, even though it was originally listed under the name TSG Coffee Corp.
“We can’t disclose the structure of the investment,” Mr. Panos said. “What I can say is that Duane controls the company.”
What’s certain is that there will be more Stumptowns, and soon.
When I see answers like this, I feel like they are trying to hide something, which makes me think there is a much bigger story here.
4. Why would Duane/TSG lie about a sale? Because Stumptown is a beloved Portland institution. It’s the story of a little coffee roaster fighting its way to the top, creating a whole new culture of coffee along the way. Portlanders love this sort of thing, which means Stumptown has a lot to lose if the story gets out. They will no longer be the local hipster brand that everyone loves, rather just another of the big players in the international coffee scene, more known for their bottled beverage than their ‘real’ coffee. Remember the way Stumptown dropped the much vaunted Clover Coffee system when they were purchased by Starbucks? They wouldn’t want the same thing to happen to them. Restaurants that are riding the wave of local, sustainable ethos would switch to someone else. Stumptown might feel the same backlash from the many coffeehouses which carry their product; a big hit to the company.
5. What is in it for TSG? Stumptown Stubbies. As stated above, Previous investments have included Glaceau Vitamin Water and Voss Water, and the fund currently holds a$15 million stake in Island Oasis Frozen Cocktail Co., a Walpole, Mass. company that makes machines and mixes for frozen margaritas. If you want to go national it takes a ton of money. TSG seems to specialize in this sort of product. Remember, Stumptown announced earlier that they plan to add a Stubbie bottling facility in Red Hook in Brooklyn, so it seems they are not planning on keeping it local.
If Stumptown wants to quell these rumors, they better move fast. Eventually the whole story will be known, and if it turns out that the coffee company has not only sold out, but has lied about the transaction, their future in Portland may be much dimmer than they had hoped.
Update – Willamette Week has now confirmed the sale of Stumptown and the 90-10% split.